Peterhead Carbon Capture and Storage project

The Peterhead Carbon Capture and Storage project was a proposal by Hydrogen Energy, a joint venture of BP and Rio Tinto, for a trial Carbon Capture and Storage scheme in north-east Scotland.

The Project Concept
In June 2005 BP, ConocoPhillips, Shell and Scottish and Southern Energy (SSE) announced that they were set to "commence engineering design of the world's first industrial scale project to generate 'carbon-free' electricity from hydrogen."

The concept of the $600 million project was that it would convert up to 70 million cubic feet of natural gas a day to hydrogen and carbon dioxide gases with the hydrogen used to power a 350 megawatt power station. Approximately 1.3 million tonnes of carbon dioxide would be pumped via existing pipelines into the the declining Miller oil field 240 kilometers offshore in the North Sea to increase the volume of oil recovered from the field. "The Miller field is currently due to cease production in 2006/7 but the injection of carbon dioxide into the reservoir could increase the amount of oil extracted from the field, potentially allowing the production of up to 40 million additional barrels of oil and extending the life of the field by 15 to 20 years," the media release stated. (The Miller oil field was a joint venture comprising BP (52%), ConocoPhillips (30%t) and Shell (18%).

The carbon dioxide, it was hoped, would then be stored underground permanently. The joint venturers hoped that initial engineering feasibility studies could be completed in late 2006 and a final decision to proceed could be made in 2009.

There was an important qualifier in the initial up-beat announcement. For the project to proceed, the media release stated, "it would also require an appropriate policy and regulatory framework which encourages the capture of carbon from fossil fuel-based electricity generation and its long-term storage." The project proponents had their eye on funds that the UK government had announced could be made available as incentives for the development of carbon capture and storage projects.

In February 2007, BP announced that it was delaying any further investment in the project a decision had been made on whether the government would provide funding.

Two years after its optimistic announcement about the project, the company finally pulled the plug on the concept. BP stated that the decision by the UK government to make funds available only to projects selected via a competition in November was a timetable which was unacceptable to the company. BP spokesman David Nicholas stated that the November date was "an extension too far for this project". BP was reported to have spend US$50 million in thr previous 18 months on the project. A later Financial Times report stated that the company had spent a total of $60 million on its evaluation.

In evidence to the House of Commons environmental audit committee the U.K. Energy Minister Malcolm Wicks that "as to Peterhead, I do not believe it would have been sensible or proper governance if we were to have a demonstration project that cost the British taxpayer literally hundreds of millions of pounds to give it to the first one that came forward, namely the Miller Field Peterhead project. Perfectly properly, we had a competition and then made the decision – it was controversial but I believe it was the right one – that instead of pre-combustion, it should be post-combustion."

The Business Strategy Behind the Hype
In its 2007 annual report, Rio Tinto explained that its motivation in becoming a part of the Hydrogen Energy joint venture as being to "position Rio Tinto Energy to profit from the advent of a global low carbon energy future and initiate the development of a broader risk management strategy for climate change regulation while providing a meaningful offer on climate change and product stewardship."

"The group’s strategic intent is to build through Hydrogen Energy a low carbon energy business primarily reliant on coal that will ultimately leverage Rio Tinto’s capabilities in identifying, acquiring and operating large long life coal assets. Gasification opens new and larger markets for coal and the aim is to maximise returns across the emerging coal gasification value chain. Early positioning will convey an important element of competitive advantage. A key to unlocking value will be to proactively shape government policy to support and enable initial projects," it stated.

Related SourceWatch Articles

 * Carbon Capture and Storage
 * International Partnership for the Hydrogen Economy

External Articles

 * "BP and Partners Plan Clean Energy Plant in Scotland", Media Release, June 30, 2005.
 * Nigel Wilson, "Chimneys sweep BP clean coal plan away", The Australian, May 10, 2008.
 * David Perry, "Clean-energy plan ‘scuppered by cost’: Minister admits north-east carbon-capture project torpedoed to save cash", The Press and Journal (Scotland), July 19, 2008.